Lawmakers critical of foreclosure-to-rental plan

Yes. 33% correct! (2)

No. 67% correct! (4)

6 total votes.

The regulator of Fannie Mae and Freddie Mac continues to gain critics with his agency's housing policies and its resistance to implement others.

Edward DeMarco, acting director of the Federal Housing Finance Agency, is getting heat from California congressional members over a pilot plan to sell 600-plus foreclosed homes in Riverside and Los Angeles counties to investors in bulk on condition they will convert them to rentals. The plan is part of a larger program to sell almost 2,500 properties in Fannie's portfolio of both occupied and vacant homes in some of the most-struggling areas of the nation.

The 19 lawmakers, three of whom are from San Diego, don't want the program in place, saying the move will further hurt the housing market and increase costs to citizens. The three from San Diego are Duncan Hunter, (R-El Cajon); Brian Bilbray, (R-Solana Beach) and Susan Davis, (D-San Diego.)

"Converting carefully selected REO properties into rentals might help reduce excess inventory in appropriately targeted areas, namely those with high inventory and low demand," the April 4 letter to DeMarco reads. "...However, counties in California do not reflect the market conditions required for the GSEs (government-sponsored enterprises) to benefit from such a program."

DeMarco says the program will help lift hard-hit communities from housing stress, according to a Feb. 1 written statement:

This is an important step toward increasing private investment in foreclosed properties to maximize value and stabilize communities. I am grateful for the collaborative effort by the many stakeholders including institutional investors, nonprofit organizations, and state and local government officials, who have worked together on this Initiative.

The California Association of Realtors has lobbied hard against Fannie Mae's program even before it was made official.

Addressing California's congressional delegation in a Feb. 6 letter, the Realtors' group said:

We fear the regulators have not appropriately analyzed proposed pilot cities. Los Angeles and the Southern California region have been named as a potential pilot program location. However, these areas are experiencing an inventory shortage and many homes for sale, especially distressed properties, are receiving multiple bids. Removing REO inventory through a bulk sale and rental program will hurt these communities. In addition, the taxpayer will lose because these REOs will be sold for less money in bulk sale than if sold as individual units.

This isn't the first time DeMarco has felt political pressure from government officials. Recently, Attorney General Kamala Harris pressed the regulator of Fannie Mae and Freddie Mac to halt foreclosures until principal writedowns are given a fair look as a way to help borrowers. DeMarco's response: Thanks for the suggestion. But no.